HUNG WING SAN, TONY v. KOO SHING SUN AND ANOTHER

HCCW 350/2011

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES WINDING-UP PROCEEDINGS NO 350 OF 2011

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D E C I S I O N

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Introduction

1.  This is the application of the 1^st respondent (“R1”) for an order that security for costs be provided by the petitioner.  It was taken out in February 2013.  The trial of this action is scheduled to last for 6 days commencing on 23 August 2013 (some 6 months from the date of the summons and less than 3 months from the date of the hearing).

Background

2.  This petition was commenced in October 2011.  It arose out of a shareholders’ dispute between the petitioner and R1.

3.  The petitioner alleges that, since the end of 2008, R1 has engaged in conduct prejudicial to the petitioner and/or the company (“R2”), such as diverting business from R2 with the help of R2’s staff, delaying/obstructing R2’s operational payments and misappropriating R2’s assets.

4.  R1 made similar allegations against the petitioner (competing with R2’s business, orchestrating the closure of R2’s operation in the Mainland, and obstructing the holding of board and general meetings).

This application

5.  This application is based principally on the ground that the petitioner is not resident in Hong Kong and has no substantial assets within the jurisdiction.

6.  The above was initially disputed.  But by the time of the hearing, the only ground of objection is that this application is made too late.  As a corollary to delay, the petitioner says this application is (or constitutes) a tactical move in that it is aimed at (or has the effect of) diverting the petitioner’s attention away from his trial preparation work, thereby occasioning prejudice to him.  The petitioner deposes that his investments in the Mainland are illiquid because it is in the form of real properties with mortgage arrangements.

7.  As can be expected, the petitioner refers to earlier instances where the courts have refused similar applications on the ground of delay and/or prejudice:

(1)   Waddington Ltd v Chan Chun Hoo Thomas HCA 3291/2003 (7 May 2013) (derivative action; security sought 3.5 months before trial; tactical move to put undue pressure on the plaintiff);

(2)   Raj Kumar Mahajan v HCL Technologies Ltd HCA 1510/2004 (15 September 2010) (security sought about 3 months before trial; unexplained delay; prejudice to the plaintiff in relation to trial preparation);

(3)   Tsang Yee Mui v The Personal Representatives of Mak Chik Wing HCA 2606/2006 (21 July 2008) (breach of trust claim; unexplained delay; security sought 8 months before trial (but hearing was only 3 months before trial)).

8.  On the other hand, R1 refers to other instances where the courts have ordered security to be provided despite the delay:

(1)   Peconic Industrial Development Ltd & Another v Chio Ho Cheong & Others HCA 16255/1999 (26 October 2005) (security sought less than 3 months before 40-day trial; explanation for delay accepted; no prejudice caused);

(2)   Bill Chao Keh Lung v Don Xia alias Xiaodong HCA 9289/2000 (breach of contract; security sought 8 weeks before 4-day trial; unexplained delay; no prejudice caused);

(3)   Yee Fat Development Ltd v Winline Knitting Factory Ltd DCCJ 447/2007 (claim for debt; trial date unknown; no prejudice caused).

9.  In this application, I find the following to be factors in the petitioner’s favour:

(1)   that the petitioner has not been residing in Hong Kong ought to be a fact known to R1 quite some time ago.  I therefore do not consider that there has been a satisfactory explanation for the delay in making this application (see also sub-para (4) below);

(2)   the delay is substantial, with the result this application was heard quite close to the scheduled trial dates;

(3)   despite R1’s criticism regarding the sufficiency of the petitioner’s affirmation, a fair reading shows that the petitioner’s more substantial assets are mainly located in the Mainland and illiquid;

(4)   further, the amount of security sought is substantial (about $2 million).  It should be noted about 68% of the solicitors’ costs were already incurred in the past (so was about 43% of counsel fee) (the substantial amount of costs allegedly already incurred is also relevant to the issue of delay (and whether the delay is satisfactorily explained));

(5)   consequently, an order for security is likely to cause prejudice to the petitioner in the manner he contended for (para 6 above).

Conclusion

10.  By reason of the above matters, it is appropriate to exercise my discretion to refuse this application.  It is accordingly dismissed.

Other matters

11.  The parties’ written submissions also mentioned various other points.  These have not been expressly set out or dealt with in the above headings.  This is so only because of the need to balance between the length of the decision and its comprehension.  It does not mean those other points are thought to be irrelevant (or have been overlooked).  To avoid doubt, those other points have also been considered.

Costs order

12.  The parties agree that the usual rule that costs should follow the event is applicable.  There will accordingly be a costs order that the costs of this application be paid by R1 to the petitioner.

13.  I consider summary assessment of costs to be appropriate.  The above costs shall thus be so assessed.  For this purpose:

(1)   the petitioner be at liberty to lodge with court and serve a statement of costs within 7 days from today;

(2)   R1 be at liberty to lodge with court and serve a statement of objections within 7 days thereafter.